Lofts in Elmwood Village church caught in dispute over contractor payments

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When Lafayette Avenue Presbyterian Church unveiled plans to turn a section of its Elmwood Village building into loft apartments, the project was hailed as an imaginative effort to help the small congregation shoulder the costs of caring for a church that dates back to 1895.

Now, it's caught in a dispute between the partners and contractors over money.

The project's general contractor has taken the church's development partnership to court to recover more than $800,000 in back payments it says the company and its subcontractors are still owed.

The $7 million project to turn a section of the church into Lafayette Lofts in Elmwood Village has been done since late 2014. Nineteen of the 21 apartments, and two office suites, have tenants.

But Buffalo-based general contractor Peyton Barlow Company Inc. and 13 subcontractors from around the region say they are still waiting to get paid for work they did.

Some of the companies say the lack of payments has constrained cash flow and their abilities to grow.

"We're a very small company and that hurts a lot," said Rich Bender, owner of Northwind Insulation in Orchard Park, which claims $13,810 in back payments.

Led by Peyton Barlow, the contractors have sued LAPC Lofts LLC – the partnership that owns the building – as well as Evans Bancorp, which was both the lender and the tax credit investor on the project. The partnership consists of the church and Evans, which is a part-owner for at least five years by virtue of the tax credits.

According to the lawsuit, LAPC and Evans owe Peyton Barlow $866,278 for work, of which just over $600,000 is owed to the subcontractors.

One of the loft apartments, staged for an open house in 2014. (Robert Kirkham/Buffalo News file photo)

"It just kind of strangles your ability to pay your bills, and we have to borrow against our line of credit, which costs us money every month," said Jack Simoncelli, owner of Simoncelli Electric, citing an 18 percent interest rate. "Your money basically turns into nothing after so much time because you pay so much interest on it."

"We did this work a long time ago, and they're occupying it, so why don't they pay us, contractors?" said Anthony Adinolfe, president of Gypsum Systems Inc. in Elma, which is owed $99,586.

On the other side, Evans filed suit against the church and the Presbytery of Western New York, citing nonpayment on its loans. "We're actively working to settle the litigation and are hopeful that a resolution can be achieved," said Evans spokesman Kevin Brady.

Murray F. Gould, CEO of Port City Preservation LLC of Syracuse – which acted as developer and now property manager – declined to comment because of the litigation. He referred questions to Michael Brady, the attorney for the partnership, who did not respond to requests for comment.

However, Mark Kostrzewski, managing member for the church's LAPC Lofts LLC, confirmed the dispute is expected to be settled within the next 30 days, if not sooner. "Everyone has been under duress on this project," Kostrzewski said. "It's a difficult situation, and it's close to resolution."

Buffalo is benefiting from a surge in redevelopments of historic office, industrial, school and even church buildings that are transformed into lively new loft apartments and commercial space. But the unusual battle at Lafayette illustrates what can happen when a complex project goes awry.

Faced with ongoing deficits, declining membership and the high costs of maintaining its enormous historic building, church leaders spent five years trying to figure out a solution before partnering with Port City. The plan was to convert much of the building into apartments and commercial space, while maintaining part of the sanctuary and other space for the church's use.

Today, the building at 598 Lafayette and 875 Elmwood includes 10 one-bedroom apartments, 10 two-bedroom apartments and a three-bedroom unit, with rents ranging from $850 to $2,600 per month. It also has a culinary center and professional kitchen used by different groups, plus event space.

The building also houses offices for the Elmwood Village Association and another new tenant, as well as a pre-school area occupied by a firm that provides therapeutic services for 3- to 5-year old children with developmental disabilities.

To finance the project, the church formed the partnership with Evans, which provided $4.34 million in loans and also purchased $3 million in state and federal historic tax credits that the project earned from the renovation. That made the bank both a lender and an investor, as well as a part-owner.

Even during the construction process, there were fits and starts because of late payments and other delays, prompting some walk-offs from the job, contractors say. And the final invoices from all the contractors have gone unpaid since early 2015, said Shawn Kimmel, owner of Aurora Plumbing & Excavation in Elma.

"We received nothing, not one cent," said Bender, who said his last invoice was sent in January 2015, after two of his employees spent several days installing insulation in late 2014.

After repeated efforts to collect, Peyton filed a mechanics lien against the partnership in July 2015, extended it and then started foreclosure proceedings in September 2016. Davis-Ulmer Sprinkler Co. Inc. also filed a lien in August 2015. The case is now pending in state Supreme Court in Erie County.

Pat Hanley, owner of Buffalo Iron Corp., said his vendors cut him off because he lacked the cash to pay them.

"This money, it's what I would use to expand and buy new equipment," said Hanley, whose five-year-old structural steel firm is still owed $18,000. "It just puts everything on hold."

Meanwhile, under pressure from Evans, the church has approached the contractors about a settlement, first at 63 percent and now more recently at 79 percent of the debt, according to Kimmel.

"A lot of guys don’t want to settle for anything. They just want to get paid," said Simoncelli, whose Orchard Park firm had eight employees doing electrical work and fire-alarm systems for 18 months. "I'm pretty confident we are eventually going to get it, but it's pretty ridiculous that it's taken this long."